Forests offer a wide range of both material and intangible benefits, all of which have a value but only some of which are currently expressed in monetary terms. Benefits which are difficult to quantify include goods which pass through the informal sector, non-marketed goods, and services. In addition, there are cultural or spiritual values often attached to forests. For some of these benefits, methods are being developed to estimate their economic contribution or proxy values.

Areas of contribution

Major industries and smaller enterprises based on forest products are the source of considerable income and employment. Less recognized, but also significant, are the employment and incomes associated with management of natural or plantation forests. Exports of primary and, increasingly, value-added forest products (wood and non-wood) generate significant foreign exchange for some countries. Tourism based on wildlife resources or scenic forest areas is important in many countries; for example, in Africa: Kenya, Zimbabwe, Botswana and Namibia.

Furthermore, forest products can provide critical inputs into major industries in other sectors, such as: charcoal in the Brazilian steel industry; fuelwood in the tea, ceramics, lime and tobacco industries of many tropical countries; pitprops and sleepers for mining; and packaging for manufactured goods.

Forest products produced or collected for family use or sale may be very important to the household economy. At local community level, the economic importance of forest products is most evident when they are scarce and the poor are faced with high prices. For example, in some urban areas of developing countries, families may spend a significant proportion of their income on fuelwood and charcoal.

Forestry employment, collection and sale of forest products, and small, forest-based enterprises provide income important for meeting household needs and for rural investment.

Forests tend to offer possibilities for income generation in rural areas where few other opportunities may be available. By providing nearly unique focus for development in such areas, their importance may often be greater than the financial value of their output may imply. Forestry enterprises also generate opportunities further afield due to their multiplier effects derived from their forward and backward linkages.

Indicative estimates of income and international trade contributions

No good global estimates of forestry's economic contribution are available, but a partial indication is provided by its share in gross domestic product (GDP) and international trade. At a global level, forestry is estimated to contribute some 2 percent of world GDP and 3 percent of international merchandise trade1 (see Table 1).

1 State of World's Forests. FAO, Rome 1995. The 'industry' component included only processed products; the 'forestry' component Included roundwood as a proxy for all resource goods. The figures are derived by multiplying output by unit value of exports. They are indicative figures only; on the one hand, they are conservative since they do not include non-wood values but, on the other, processed products use roundwood inputs that were separately valued.

Table 1 shows significant differences between regions and countries in the relative importance of forestry to their economies. In particular, forestry appears to provide a relatively high contribution to GDP in many countries where the forest industry is not particularly strong - especially resource-poor developing countries. This may, in part, reflect the low level of development of the rest of the economy, or the fact that it is only modestly monetized or has few other export products.

Table 1Countries in which forestry's share of GDP and international merchandise trade is 10 percent or higher2

2State of the World's Forests, FAO, Rome, 1995,

where forestry's share of GDP is 10 percent or higher

where forestry's share of trade is 10 percent or higher

country

percentage of GDP

percentage of trade

country

percentage of trade

percentage of GDP

Uganda

23

0

Cambodia

43

-

Bhutan

22

11

Solomon Islands

42

16

Zaire

21

3

Equatorial Guinea

42

4

Swaziland

20

13

Finland

36

7

Kenya

19

0

Myanmar

35

8

Zambia

17

0

Liberia

31

-

Nigeria

16

0

Laos

21

15

Solomon Islands

16

42

Central African Rep.

20

12

Burundi

15

-

Sweden

18

4

Chad

15

-

Congo

16

7

Laos

15

21

Cameroon

15

6

Malawi

15

0

Canada

13

5

Sierra Leone

14

0

Swaziland

13

20

Madagascar

13

1

Fiji

13

3

Rwanda

13

-

Gabon

12

6

Sudan

13

-

Indonesia

12

10

Central African Republic

12

20

Bhutan

11

22

Gambia

12

-

Cote d'Ivoire

10

9

Ghana

11

9

New Zealand

10

5

Benin

11

0

Burkina Faso

11

0

Papua New Guinea

11

7

Indonesia

10

12

Malaysia

10

9

Africa

6

2

South America

3

3

Asia

2

2

North/Central America

2

5

Europe

1

3

Oceania

2

3

Former USSR

2

4

Developing countries

4

2

Developed countries,

1

4

World

2

3

As economies grow, value-added production and commerce tend to increase faster in secondary and tertiary sectors where productivity is greater than in a primary sector like forestry. Hence in developed countries, the forestry sector's share may be relatively small, even where the sector is internationally prominent, as in Canada or Finland. A similar pattern will emerge in rapidly developing Third World countries.

Table 1 shows that in terms of share of total GDP at regional level, forests appear to be most important in Africa (6 percent), followed by South America. The world average is 2 percent of GDP, but the average in developed countries is only 1 percent. The forestry sector contributes more than 10 percent of GDP for 18 countries in Africa, four countries in Asia and two in Oceania, but is less significant in other regions. Although developed countries produce more than 80 percent of the world's industrial forest products, the average contribution to GDP for these countries is only 1 percent, compared with 4 percent for developing countries.

The contribution of forests to GDP is not necessarily highest in what are often considered 'forest countries' in the sense of industrial forestry. In Africa, for example, the contribution of forestry to GDP appears to be fairly limited in the highly-forested countries of Cameroon and Congo, whereas it is more substantial in Uganda and Kenya where forest resources are more limited. In many developing countries, the less commercialized contributions of forests to the economy can dominate; fuelwood, for example, may be economically more significant than industrial wood.

The contribution of forest products to world merchandise trade is highest in North and Central America (5 percent), followed by the former USSR (4 percent) with South America, Europe and Oceania at 3 percent each. In Africa and Asia, the forestry proportion of trade is 2 percent. These averages belie the importance of forest products trade in the smaller economies. In Africa, trade in forest products accounts for more than 10 percent of the value of total trade in eight countries. The share of forest products in total trade exceeds 10 percent in five countries in Asia (all of which have less developed economies), and in only three countries in North America and Europe (Finland, Sweden, and Canada).

Improving valuation of forests and integrating them into national accounts

The above estimates of forestry in GDP have focused on wood products only, to the neglect of the many other forest contributions. The exclusion of valuable but non-marketed and intangible functions results in an under-estimation of the contribution of the forestry sector to national economies.

The need to increase people's perception of the value of forests, and to improve methodologies which incorporate social, economic and ecological values of trees, forests and forest lands into national economic accounting systems, has been highlighted in UNCED and many other fora. Work is under way to improve methodologies for valuation of forests (see Box 1).

Improving forestry profile in national accounts

Improved valuation would, once adequately reflected in a country's national accounts, provide a basis for a better appreciation of forestry's contribution. In a book on economic accounts for agriculture, FAO mentions the diversity of goods and services of forests and also of the interest groups which want access to them.3 It highlights the need for effective decision making in situations of actual or potential conflict, and stresses the importance of providing policy-makers with 'information that gives them a complete picture of the net benefits derived from forests... i.e., on wood and non-wood products; services or functions; and benefits from marketed and non-marketed aspects.' The publication highlights the need to ensure that production from forest-based industries and artisanal manufacturing is not inadvertently left out of national accounts altogether because it falls between the forestry, agriculture and industry sectors and thus may be overlooked by all of them.

3 FAO. 1996. A System of economic accounts for food and agriculture. FAO Statistical Development Series No, 8, FAO, Rome.

Given the importance of fuller valuation, some countries are attempting to improve the quality of estimates for forestry in their national accounts, despite the unresolved weaknesses of valuation methodologies. Noteworthy progress has been made in developed countries such as Canada and Finland, and in developing countries such as Costa Rica, Indonesia and the Philippines. Many proposals exist for resource accounting, focusing on capturing environmental or sustainability values. At international level, the International Institute for Environment and Development developed a set of guidelines for ITTO in 1993, and a number of other NGOs have also been active in this respect.

Two approaches, both potentially useful, have been adopted: to improve the estimates of forestry's contribution in countries' core national accounts under the System of National Accounts (SNAs), and to develop satellite accounts for forestry which can, in greater detail, provide a kind of forest 'green' version of the sector's contribution. These satellite 'green accounts' can reflect environmental values better than the modified core SNAs, and thus are more likely to satisfy the environmental concerns that often motivate calls for better forestry accounts.

One concern that receives attention in improved accounts is the question of capital depreciation of the forest resource base due to deforestation and to degradation. An approach proposed at the World Bank gives considerable attention to sustainability by accounting for natural capital and for the depletion of resources.5 A monetary value is placed on environmental impacts. The results of applying the methodology would be to revise completely the estimated wealth levels and the ranking of some countries.

5 Serageldin. 1995, Sustainability and the wealth of nations: first step in an ongoing journey. Third Annual World Bank Conference on Environmentally Sustainable Development. Preliminary draft. 30 September 1995.

Box 1:The valuation of forests

There is currently a high level of activity to develop valuation methodologies and to test them; and a number of countries have taken steps to improve their approach to the valuation of forests. Methodology development has focused on improving the valuation of non-marketed and less tangible benefits which are not normally reflected in national accounts. The theoretical basis has been agreed upon and the categorization of values is generally accepted as being direct or indirect, use or non-use, capable of being captured or intangible at all times.

The aim is to develop methods which are objective, so that values can be quantified and compared, both within and between countries. The current situation has recently been exhaustively reviewed4 and the main features are as follows:

· Valuation studies and methodologies exist, but many are academic and are not yet widely applied in mainstream planning.

· While the basic valuation methods exist, difficulties include the inability to take into account:

(a) the probability of securing a given benefit (particularly important when dealing with values of such things as medicinal plants and biological resources whose discovery may involve a high degree of chance); and

(b) the cost of securing the forest value - many valuation studies appear to assume that the full value is also the net value, i.e., they ignore the costs of development with the result that estimates are exaggerated.

· Basic information on production, i.e., function potentials (e.g., yields of particular goods or services in relation to given management interventions), is missing or weak. Valuation attempts made with different coefficients may thus result in highly divergent results for any given situation.

· The most prominent studies have been done by funding agencies and have demanded time, skill and funding resources that are beyond the means of many of those who need this information, especially in developing countries. There is need for rapid appraisal techniques.

· The usefulness of the valuation results may depend on who ascribes the values and who uses the results. Values allocated to functions such as carbon sequestration, often dwarf those of productive forest functions such as wood production. High values are being claimed for forests but they are not matched by any tangible returns which policy-makers can use to help secure support for forestry. High values for functions such as carbon capture mean relatively little to those who are often the de facto decision-makers as to how forest land and resources are used, namely forest dwellers or local people who may have pressing survival needs for land for agriculture or for forest products to use or sell. These groups rarely get an opportunity to give their views in attaching values to various forest functions.

· For tropical forest valuation, the views of pressure groups in industrial countries or in urban centres inside the country are often given more weight than local ones; the views of officials and academics within countries are being used as proxies for general societal preferences.

· Presently, there is inadequate information to say whether forestry is receiving any stronger policy support in countries where more comprehensive forest valuation has been undertaken

There is great potential benefit in adopting approaches which are applicable to other natural resources. For example, fossil-based natural resources are credited with major contributions to national economies, but the fact that the product itself represents irreplaceable capital is often ignored. Accounting, as a discipline, rests on following tradition and being predictable. It is important that national accounting approaches adopted for forestry and other sectors are based on neutral professional analysis and broad-based consultation; they must not be seen as merely a tool for advocacy by individual interest groups.

Although the environmental services provided by forests are seldom fully valued or adequately reflected in forest planning and management decisions, they are nevertheless accorded increasing importance in national and global debates on sustainable forestry. Environmental services include: Protection of soil and water resources; the conservation of biological diversity; support to agricultural productivity and sustainability; carbon sequestration and the mitigation of global warming; the combating of desertification and resource degradation in arid and semi-arid zones; provision of shade, amenity and recreation; and protection of coastal areas and coastal fisheries. The importance of many of these are highlighted in UNCED's Agenda 21 as well as in international conventions on biological diversity, desertification, and climate change (see 'The international dialogue and initiatives with relevance to forests' in Part 2). Some developments related to the environmental services provided by forests are discussed below.

Drylands, defined as arid, semi-arid and dry sub-humid areas, are among the world's most fragile ecosystems, and are made more so by periodic droughts and the risk of desertification. Drylands cover around 30 percent of the world's land area and are inhabited by about 900 million people, a large proportion of whom are among the poorest of the world. Over time, people living in dryland areas have evolved complex production systems to minimize the risks posed by extreme climatic conditions. These include mixed cropping systems, agroforestry systems, and nomadic and transhumant livestock herding.

Various forces, however, are contributing to the degradation of resources in these areas, including increasing population density, economic pressures, climatic trends, changes in resource management practices, and patterns of land and resource tenure. An estimated 70 percent of the world's drylands are affected by desertification, defined by the international Convention to Combat Desertification (see page 105) as 'land degradation in arid, semi-arid and dry sub-humid areas resulting from various factors including climatic variations and human activities'.

Deforestation (mainly for conversion to agricultural use) and overexploitation of forests and woodlands (through fuelwood collection and overgrazing) are major causes of soil degradation in dryland areas in Asia, Latin America and the Caribbean, Oceania, and Africa. FAO's Forest Resources Assessment data from 1980-90 indicate that the deforestation rate in the dry and very dry tropics is high (0.9 percent per year). Programmes to combat desertification focus on improved management and protection of existing forest and woodland resources, on increased vegetative cover outside forests (e.g., through agroforestry, maintenance of trees and shrubs in critical watersheds and degraded areas), and on range improvement and development. Action programmes, which are being proposed under the Convention to Combat Desertification, are expected to supplement work which has been carried out through national initiatives, regional bodies (e.g., the Permanent Interstate Committee for Drought Control in the Sahel - CILSS) and international programmes (e.g., the UN Sudano-Sahelian Office).

Watershed management and mountain forests

Forests and other woody vegetative cover in uplands and on sloping lands serve important environmental functions in land stabilization, erosion control and regulation of hydrologic flow. Maintenance of adequate forest cover through vegetation management and reforestation has long been considered a primary objective of watershed management programmes. Ensuring that soil conservation measures are taken where vegetation on sloping lands is disturbed, e.g., by forestry and agricultural activities, is also an issue of worldwide concern. This is particularly essential in many developing countries, where population pressures and lack of alternative lands are resulting in expansion of agriculture onto steeper and more marginal lands by poor farmers. According to Forest Resources Assessment data collected by FAO for the decade of the 1980s, the hill and mountain forests were undergoing the highest rate of deforestation in the tropics (1.1 percent per year). While not all due to clearing for agriculture, this is a major cause.

Over the past two years, Chapter 13 of UNCED's Agenda 21, 'Managing fragile ecosystems: sustainable mountain development', has served to highlight the importance of mountain areas and the ecological and economic role that forests play in them. The issues include: the expansion of agriculture onto these lands, and associated problems of soil erosion and hydrological disruption (a problem most critical in developing countries); the economically-depressed nature of these areas (a universal problem); and social and land-use changes due to net out-migration from these areas (an issue mainly in developed countries).

The objectives of sustainable mountain development are two-fold: to improve the natural resource base and quality of life of upland populations, and to protect vital downstream interests. Watershed management programmes have, in the past, had a strong tendency to focus on the latter and on technical solutions, with less regard to the immediate needs of the local populations or to ways in which they might be involved. The current approach balances the two objectives, an approach which has arisen from the realization that any long-term solution to watershed management must consider the development needs and the role of the local population in watershed management. In terms of forest management and protection in mountain watersheds, this has meant greater involvement of local populations in planning and implementing management strategies and programmes, often with more direct benefits to mountain populations.

Chapter 13 has drawn the attention of decision-makers and planners, both at global and national levels, to these issues over the last few years. It stresses the need to adopt an integrated and participatory approach to watershed conservation and upland development. As part of the UNCED follow-up process, regional intergovernmental and NGO consultations have been held, beginning in late 1994 in Asia, Latin America, Africa and Europe, aimed at focusing attention on the special concerns of mountain areas, including the important role of mountain forests, and to define the types of action which are both necessary and appropriate for each region.

While the trends in balancing resource conservation with socio-economic development, and in adopting more participatory approaches to mountain development are often associated with developing countries, similar approaches are being called for in some developed countries. For example, in September 1996, a workshop was held in France to launch an initiative to establish a European Observatory of Mountain Forests, aimed at supporting sustainable resource management and socio-economic development in the mountain regions of Europe. This effort is spearheaded by the European Federation of Local Forest Authorities, which includes forest communities and local authorities in Europe in its membership.

Forests and global climate change

The role that human activities play in influencing global climate has been vigorously debated since warming of the Earth's surface temperature was detected several years ago. However, the authoritative Intergovernmental Panel on Climate Change (IPCC) only recently concluded in its summary of the 'Second Assessment Report' that 'the balance of evidence suggests a discernible human influence on global climate'.6 This statement has potentially enormous implications for policy making, for the energy industry and for the global economy. It may also have a direct effect on the forestry sector.

The global mean temperature of the Earth's surface has increased by 0.3-0.6 °C over the past 100 years.7 This rapid increase in global temperatures is expected to lead to regional and global changes in climate that could have significant impacts on human and natural systems. Much of the observed warming of the Earth's surface is believed to be due to increased concentrations of 'greenhouse gases' in the Earth's atmosphere, which have altered the Earth's radiative balance, i.e., the 'greenhouse effect'. The main greenhouse gases are carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O), of which CO2 is by far the most important (accounting for 65 percent of the greenhouse effect). Human activities, including those involving the use of fossil fuels, land use changes and agricultural production, have resulted in increased concentrations of these gases in the atmosphere since the onset of the industrial revolution. Most of the CO2 emissions derived from human activity are the result of fossil fuel combustion (76 percent of the total). Tropical deforestation and forest degradation account for an estimated 23 percent, and the remaining 1 percent comes from cement manufacture. The greatest gains in reducing CO2 emissions, therefore, can come from controlling the burning of fossil fuels. However, because forests, as both sources and sinks of CO2, can both contribute to and mitigate climate change, they figure prominently in strategies to address this problem. Various forestry-based strategies are being proposed for mitigation, and some reforestation schemes have been carried out with the purpose of offsetting CO2 emissions (see Box 2).

7 The sources of information In this paragraph and Box 2 are: Kirschbaum M., et. al. Climate change impacts on forests; and Brown, S. Management of forests for mitigation of greenhouse gas emissions, chapters 1 and 24 respectively, of the IPCC Second Assessment Report.

Conservation of biological diversity

Forests play an important role in the conservation of the world's biological diversity, defined as the variability among living organisms and the complexes of which they are a part, including diversity within species, between species and of ecosystems. Forests are believed to provide habitat to about two-thirds of all species on Earth. Tropical rainforests, which cover only 7 percent of the Earth's land area, harbour perhaps one-half of all known plant and animal species. Other forest types, such as dryland forests or temperate forests, although less rich in terms of numbers of species, have plants and animals of actual or potential economic significance and which make important contributions to the functioning of these ecosystems.

The unprecedented scale and rate of human-induced changes to forests are threatening forest-based biological diversity. The deterioration or loss of forest ecosystems has led to the extinction of some species and the reduction of genetic variation within other species through the loss or reduction in size of certain populations in an area. While the magnitude of such losses or the extent of degradation of biological diversity is unknown, evidence suggests that the rate of extinctions, at least among vertebrates and plants, has accelerated significantly under the impact of humans.8

While nature reserves and protected area systems (i.e., in-situ conservation) are the most efficient and often most effective means of conserving biological diversity, few national protected area systems are sufficiently comprehensive, even in terms of coverage of the ecosystems in a country, no less in terms of species or variation within species. In addition, only a limited number of forest plant species are conserved satisfactorily ex-situ, such as in gene banks, plantations, or live collections (botanic gardens, arboreta). Ex-situ conservation of wildlife (e.g., in zoos) is also far from adequate. Managing forests and trees in protection and production forests and in agricultural lands, in such a way as to contribute to the conservation of biological diversity, is increasingly seen as an essential complement to conservation within parks and protected areas.

Box 2Forests and climate change

The vegetation and soils of the world's forests contain a vast quantity of carbon - more than one and a quarter times the amount stored in the atmosphere. Carbon dioxide (CO2) is released when forests are cleared or degraded, and vegetation is burned or decays. Burning forest vegetation also releases other greenhouse gases, including methane (CH4), nitrous oxide (N2O), carbon monoxide (CO), and oxides of nitrogen (NO). When forests grow, CO2 is withdrawn from the atmosphere through photosynthesis and stored as carbon in the vegetation. Levels of carbon in the soil may be increased by reforestation and other forest management practices.

Currently, the world's forests are estimated to be net sources of CO2, primarily due to deforestation and forest degradation in the tropics. Temperate and boreal forests which, globally, are slightly increasing in area and in some places in biomass per unit area, are net carbon sinks. Temperate forests may also be absorbing additional amounts of CO2 through enhanced forest growth caused by human-induced CO2 fertilization and nitrogen deposition.

The following three forest-related strategies have been proposed as means to influence CO2 emissions:

2. increasing storage of carbon in forests (by increasing forest area or biomass per unit area) and in forest products; and

3. substituting fossil fuels with fuelwood from sustainably managed forests, and substituting energy-expensive products (e.g., steel, aluminum or concrete) with industrial wood products. The forestry sector has the ability to influence the first two, whereas the implementation of the third strategy will depend upon policy measures, and product development and marketing efforts by governments and industry.

Improved forest and land management resulting in lowered rates of deforestation and forest degradation in the tropics would reduce the current rate of CO2 emissions substantially, and would also reduce the release of other greenhouse gases associated with the burning of forest vegetation. Expanding the amount of forest under protection (e.g., conservation areas, forest reserves) and improving harvesting practices to reduce waste and prevent damage to residual trees and to soils, would also help maintain existing carbon stocks. Practices to increase the amount of carbon stored in forests include: expanding the area of forest plantations on non-forested lands; increasing tree cover on croplands, pasture lands or elsewhere in the landscape; and promoting recovery of degraded forests through natural regeneration or enrichment planting. Increased carbon storage in forest products could be achieved if the demand for wood products rose faster than their rate of decay, or if the lifetime of wood products were extended by making them more durable, or by recycling them.

The third strategy, termed 'substitution management', has the greatest long-term potential for greenhouse gas mitigation. Unlike the first two, which can produce only finite increases in terrestrial carbon storage, this third group of activities can reduce net CO2 emissions indefinitely. Emissions from fossil fuels are avoided, and emissions from wood are balanced by subsequent regrowth.

The IPCC estimates that about 12-15 percent of the projected CO2 emissions from fossil fuel consumption from now until 2050 could be offset by slowing deforestation, promoting forest regeneration, and increasing the area in plantations and agroforestry systems. Tropical forests have the greatest potential for sequestering carbon; they could provide 80 percent of increased storage of carbon in the world's forests, mainly through forest regeneration and reduced deforestation. Tropical America has the greatest potential for increasing carbon storage, followed by Asia and then tropical Africa. It is difficult to predict the magnitude of emission mitigation that can actually be achieved through these various forest management practices, however, because they involve complex institutional, economic, demographic, and cultural factors that influence land-use practices.

A number of projects to avoid, sequester, or reduce greenhouse gas emissions through forest management practices are now being jointly implemented by developed and developing countries. These projects, often referred to as carbon offset projects, include efforts in forest conservation and sustainable forest management, reforestation and plantation establishment. Under the UN Framework Convention on Climate Change, a pilot phase for 'activities implemented jointly' (AIJ) has been established to test and evaluate the feasibility of achieving the objectives of the Convention through such projects. As of June 1996, thirty-two AIJ projects had been reported to the FCCC Secretariat, nine of which are forestry related.

The need for such a multi-faceted approach was highlighted in the United Nations Environment Programme's global assessment of biological diversity, which was released in late 1995.9 This comprehensive work reviews current knowledge of the subject; discusses many issues involved in assessing, conserving, valuing and using biological diversity; and mentions recent international initiatives in biological diversity conservation including developments related to the Convention on Biological Diversity (CBD) which was enacted in 1993. The Conference of the Parties of the CBD will work in a complementary way with the Intergovernmental Panel on Forests, and other forest-related fora, to address the conservation of forest-based biological diversity.

An estimated 840 million people do not have sufficient food to fulfil their basic nutritional needs, despite worldwide increases in food supplies. The problems of world hunger and food insecurity stem from limited physical access to food, the continuing inability of household and national incomes to meet the cost of food purchases, the instability of supply and demand, and natural and human-made disasters. International attention was focused on the issue of food security at the World Food Summit, convened by FAO in Rome in November 1996 and resulting in the Rome Declaration on World Food Security and the World Food Summit Plan of Action. The Summit stressed the importance of ensuring that increases in world food production are achieved through sustainable management of natural resources, and that they are accompanied by measures to ensure universal access to food.

Efforts to achieve worldwide food security will have an impact on forests, and will draw increasing attention to the supportive role that forests play in attaining food security. Increased production of food in developing countries is likely to be achieved through both intensifying food production on existing agricultural lands, and increasing the area of land available for agriculture. FAO estimates that the increase in world food production is likely to be in the region of 1.8 percent per year from now until the year 2010.10 In order to achieve this, an estimated 90 million ha of new land may be brought into agriculture in the developing countries, mainly in sub-Saharan Africa and Latin America. About half of this is likely to come from forests. The questions are not whether forest land will be converted to agricultural land, but rather, what forest land will be converted and will such land provide greater benefit being managed for agricultural production than for forest goods and services?

Apart from the provision of land for agriculture, forests and trees outside forests play important roles in food security. For example, they offer a direct contribution to food supply and to nutritional well-being; provide a source of income necessary to purchase food; give protection to the resource base upon which food production depends; and provide a source of fuelwood to cook food.11

A wide range of trees and forest products regularly provide food for people, or fodder for their livestock. While forests and trees are not the major suppliers of foods in most farming systems, they often provide important supplements and may be critical in places where there are strong seasonal cycles of food availability and scarcity and where risk of crop failure is high. In addition, they often provide 'fallback' foods in times of emergency. Tree and forest plant products and bushmeat generally make the greatest contribution to the diets of the rural poor who have limited physical and economic access to other foods.

Forests contribute to household food security by providing employment and products for sale. Forest products are major sources of income for many rural poor in developing countries. Forest industries and exports of forest products generate income and foreign exchange for some countries, making it possible for them to import needed foodstuffs.

Certainly the most important contribution of forests to food security worldwide is their role in the protection of the resource base needed for agricultural production. Maintaining good forest cover on critical watersheds is essential for safeguarding a reliable and clean water supply for downstream irrigation systems. Trees used as windbreaks offer essential protection for agricultural fields; windbreaks are used the world over where risk of wind erosion and wind damage to crops is high. Apart from the above, trees are found in intimate association with farming systems throughout the world in a vast array of agroforestry systems, attesting to their economic importance and, ultimately, to their supportive role towards the provision of food security.

Tree-growing practices contribute to a wide variety of existing farming systems. Trees tend to be prominent parts of systems where capital and physical resources are limited. In such conditions a tree component within the farming system can play one or more of the following five overlapping roles:

1. Productivity of land in situations of scarce capital can be maintained through the substitution of trees for purchased inputs of fertilizer and herbicide, and investments in soil, crop protection and/or irrigation water.AF systems:contour hedgerows, alley-cropping, improved fallows, intercropping with trees

2. Growing trees can contribute to the productive use of land in situations of scarce capital and labour where trees, as low-input, low-management crops, constitute the most effective use of these resources.AF systems: shifting cultivation, improved fallows, woodlots

3. A tree component can maximize returns to the land in situations where land and capital are limited, and tree/crop/livestock combinations permit fuller use of available labour than alternative uses of the land.AF systems: homegardens, multi-storey tree gardens

4. Income-earning opportunities are enhanced when the total value (per unit labour and capital) of on-farm production can be increased by the inclusion of trees.AF systems: boundary planting, intercropping with trees, woodlots

5. Trees can help to strengthen risk management through diversification of outputs, wider seasonal spread of inputs and outputs, reduction of the likelihood of crop failure through drought, and build-up of tree stocks to provide capital.AF systems:applies to most agroforestry system

The support provided by trees to agriculture, or to the welfare of the farm household including to food security, is most critical in subsistence farming or low-income households. The actual role that trees play depends to a large extent on the balance of availability of land, labour and capital to the farmer. This is illustrated in Box 3 which indicates both the circumstances under which farmers grow or maintain trees in their farming systems, together with some of the agroforestry systems which meet these conditions.

As indicated above, the contribution of forests and trees to food security is often relatively more important to the rural poor and to countries with low per caput GNP than to higher income groups and wealthier countries. The essential role of forests and trees to food security is clearly seen in the countries most vulnerable to food security problems: namely the 32 low-income food-deficit countries with the lowest capacity to finance food imports.13 Trees are a critical component of the food production systems in most of these countries: through agroforestry systems which dominate subsistence level agriculture; through provision of fodder in livestock-based agricultural systems; through provision of important forest foods to the populations; or through watershed management (see Box 4).

13 FAO. 1995, The State of Food and Agriculture 1995 FAO, Rome.

Box 4The role of forests/trees in food security in certain low-income food-deficit countries

Urban and peri-urban forestry The role of forests and trees in urban and peri-urban areas has attracted international attention only within the past few years. It is, however, likely to become an issue of increasing importance given that more than half of the world's population is expected to be urban by the turn of the century. Urbanization is occurring at a rapid rate; the percentage of people living in urban areas has increased from 29 percent in 1950 to 45 percent in 1995. It is expected to reach 61 percent by the year 2025. There has been a doubling of the number of urban dwellers between 1950 and 1995. Most of this increase is taking place in developing countries. While nearly three-quarters of the population of Latin America and the Caribbean is already urbanized (as a result of migration over the past 20-30 years), Asia, Africa and the Near East have only recently reached their peak urbanization rates. Rapid urbanization in these regions is expected to continue for several decades. This is creating, and will continue to create, a host of problems, not the least of which are environmental. The challenges of ensuring an adequate quality of life in urban areas, in developed and developing countries alike, were highlighted by the UN Conference on Human Settlements (Habitat II), held in Istanbul in June 1996.

The roles that forests and trees can play in improving the urban environment and the well-being of urban dwellers are considerable and varied, including: protection of watersheds to prevent erosion and to ensure a clean water supply for the city; protection against sands and winds in arid and semi-arid areas; provision of shade and a cooling effect in hot climates; mitigation of air pollution; buffering of noise; provision of habitat for urban wildlife; and even disposal sites for liquid or solid waste. In addition, the amenity and recreation value of forests, trees and green spaces in cities is widely recognized; greenspace zoning is a standard component of city planning. Provision and maintenance of adequate urban greenspace and trees, however, is more often successfully achieved in developed countries, where city planning can stay ahead of urban growth and funds are available for such a purpose, than in many rapidly urbanizing developing countries. Nonetheless, the psychological benefits conferred by urban forests and parks, and the demand for greenspace, is certainly universal. In some countries (e.g., in the USA and the UK), community tree-planting activities are being used as an effective mechanism for raising environmental awareness, uniting neighbourhoods around a common activity.

Urban forestry can play an important productive role in urban and peri-urban areas. For example, many developing countries, particularly in parts of Africa and Asia, have been active in establishing plantations and managing natural forests in peri-urban areas for fuelwood production to supply urban markets. Agroforestry practised in homegardens in urban household compounds plays an important role in family nutrition in some cities.

While urban forestry and arboriculture are well-established disciplines in many developed countries, this is much less true in most developing countries. In addition, the needs are much broader in developing countries. Far more still needs to be understood about the dynamics between urban growth and forest and tree resources in urban and peri-urban areas, and about the particular roles of urban forestry under the special conditions posed by rapid urbanization of a high proportion of poor people. In addition, more action is needed with respect to monitoring urban forest resources, developing technical aspects of tropical arboriculture, and defining the respective roles and responsibilities of forestry, city parks and other departments and of the urban dwellers themselves in urban forestry.

Factors affecting changes in consumption World consumption and production14 of forest products is dominated by: fuelwood and charcoal; industrial roundwood; sawnwood; wood-based panels; fibre furnish for paper and paperboard manufacture15; and paper and paperboard. Box 5 outlines the relationships between these products. Consumption and production of the major products are driven by many factors, of which population and income are the most important.16

14 At world level, consumption is equal to production, after adjusting for storage losses and stocks.

15 Includes all pulp used for paper-making - mainly made from wood but a proportion is made from non-wood fibre sources (such as straw or bamboo, nationally important in China and India respectively), 'Recovered paper' formerly called 'waste paper' for recycling is also included in this commodity group.

16 Note: the trends presented here are based on international statistics covering both fuelwood, a relatively non-commercialized commodity, and industrial products which are relatively easy to monitor as they are included in most official statistics. Fuelwood is consumed mainly In the informal sector and is rarely recorded; therefore, the information given about it carries less certainty than for industrial forest products.

Both population and income have increased considerably during recent decades. Between 1970 and 1994, world population grew by more than 50 percent. In South America and Africa, it grew by more than 60 percent and 90 percent respectively. World income, measured as GDP, has increased by an estimated 109 percent in real terms during the same period - by 97 percent in developed countries and 160 percent in developing. Except for fuelwood, consumption usually rises with an increase in both population and income: in the case of fuelwood, however, an increase in income tends to lower consumption.

Box 5Forest products and their inter-linkages

All wood forest products originate to a large degree from 'total roundwood' which is subdivided into 'fuelwood and charcoal' and 'industrial roundwood'. The latter is in turn composed of 'sawlogs and veneer logs', 'pulpwood and particles' and 'other industrial roundwood'. Any of these categories of roundwood can either go directly into domestic processing or into international trade.

From 'sawlogs and veneer logs' are derived veneers, sawnwood and plywood. From 'pulpwood and particles' (which can include wood chips) is made wood pulp which, in turn, can be traded as market pulp or go directly into making paper and paperboard. The 'wastes' or residues in converting roundwood into sawnwood or veneer and plywood can be chipped and manufactured into other types of panels or into pulp for paper and paperboard. Once used, paper and paperboard can be collected (i.e., 'recovered') and recycled into pulp again, so providing a raw material that supplements fresh wood for paper and paperboard manufacture.

Figure 1 shows the proportional changes for population, income and consumption of the main forest products. Figures 2 and 3 (on pages 48 and 49) summarize key changes in terms of quantities produced, while Table 2 shows changes in per thousand capita apparent consumption.

Global consumption of wood has expanded by some 36 percent (around 900 million m3) over the past two and a half decades, reaching almost 3 400 million m3 in 1994.20 Broad estimates suggest the value of this consumption in 1994 to be in excess of US$ 400 000 million, with industrial usage accounting for 75 percent of this. Slightly more than half of the wood volume was used as fuelwood, and the rest was used for a variety of industrial purposes. Fuelwood consumption expanded more rapidly than industrial roundwood consumption, growing by 60 percent to 1 890 million m3 in 1994, while industrial roundwood consumption grew by 15 percent to almost 1 500 million m3, although actually declining from a high of 1 720 million m3 in 1990.

20 The developments reported are based mostly on the FAO Yearbook of Forest Products, the most complete and historically continuous statistical series on these products, with a database that starts in 1961. A full summary of world and regional production and consumption with subtotals for developing and developed categories is in Table 4 of Annex 3.

The decline in consumption from the 1990 level reflects both supply and demand conditions. A major factor was the continued dislocation of output in the Russian Federation where reported industrial roundwood removals were down substantially (around 50 percent from the 1990 level). The decline also reflected weak demand in the industrialized countries. Further, the supply of logs continued to be affected by restrictions on harvesting in North America and the main tropical Asian countries, increasingly due to environmental concerns. Some African countries also increased their restrictions on logging and export, both for forest management reasons and to encourage greater domestic processing.

World production of most individual forest products (Figures 2 and 3) rose substantially in volume terms over the period 1970-94. Only sawnwood had a lower production in 1994 than in 1970. Output ranged from a minor fall in the production of sawnwood, to a 113 percent increase in paper and paperboard products. The slow growth for industrial roundwood masked the fact that coniferous roundwood production only increased by 1 percent, while that of non-coniferous roundwood grew by 48 percent. The main impact was post-1990, as production of both coniferous and non-coniferous roundwood had increased up to that point. Industrial roundwood and sawnwood both reached a peak in 1990 and then declined, mostly due to dislocation of output in the former USSR; recent levels have approached the 1990 high.

Growth rates for consumption of many commodities (see Table 3) during 1980-94 have been slower than for the 1970-80 period in many regions. Of particular note are the following:

· The growth rates of fuelwood and charcoal consumption and of population are nearly equal in developing countries.

· Consumption and production of fuelwood, industrial roundwood and sawnwood grew less than GDP in both developed and developing country categories.

· For wood-based panels, and for pulp and paper commodities, developing country consumption grew much faster than both GDP and population. The developing countries' share of total roundwood production has increased steadily from 49 percent in 1970 to 61 percent by 1994 (see Table 4 and Figure 2). They have increased their share of industrial roundwood from 17 percent to 33 percent.

Changes at a world level, and a breakdown for developed and developing countries, are shown in Figures 2 and 3 and in more detail in Table 4. Regional figures for production and consumption are given in Table 5 of Annex 3. For industrial roundwood, the most impressive changes have occurred, not for the leading consuming regions, but for the others: Africa's consumption nearly doubled to about 60 million m3 between 1970 and 1994 with its share rising from less than 3 percent to 4 percent. South American consumption also rose from 3 percent to more than 7 percent. However, it was the growth of consumption in Asia that transformed the global balance: from consuming 15 percent of world industrial roundwood in 1970, Asia came to account for 21 percent (compared to about 20 percent for Europe) in 1994. Similar shifts have occurred for other commodities. For paper and paperboard the main developments have been the sharp declines in share of consumption by North/Central America and by Europe, mostly in favour of Asia which raised its share from 15 to 30 percent.

Table 4Summary breakdown of world production of roundwood by economic category, 1970-94 (million m3)21

21 Calculated from FAO Yearbook of Forest Products. 1979, 1994 editions. 'Other industrial roundwood' adjusted from published data for wood residues and shares of developed and developing countries pro-rated.

1970

1990

1994

volume

percent

volume

percent

volume

percent

1970=100

total roundwood

world

2 463

100

3 499

100

3 358

100

136

developed

1 257

51

1 559

45

1 318

39

105

developing

1 206

49

1 947

55

2 122

61

176

fuelwood and charcoal

world

1 185

100

1 780

100

1 891

100

160

developed

187

16

234

13

191

10

102

developing

998

84

1 546

87

1 700

90

170

industrial roundwood

world

1 278

100

1 718

100

1 467

100

115

developed

1 070

84

1 318

77

1 051

72

98

developing

208

16

401

23

417

28

200

of which: saw and veneer logs

world

757

100

1 056

100

895

100

118

developed

623

82

808

76

644

72

103

developing

134

18

248

24

251

28

187

pulpwood and particles

world

314

100

434

100

496

100

158

developed

300

95

376

87

427

86

142

developing

14

5

58

13

69

14

493

other industrial roundwood

world

207

100

228

100

76

100

37

developed

149

72

137

60

27

35

18

developing

58

28

91

40

49

65

84

Fuelwood and charcoal consumption increased by about 60 percent to reach an estimated 1 890 million m3 in 1994, of which about 1 percent was charcoal. Over the 1970-94 period, Asia accounted for half of the world's fuelwood use; Africa's share increased from one-fifth to more than one-quarter due to that continent's high population growth and relatively low incomes. Rapid economic growth in some large Asian countries (notably China, India, Indonesia) may slow down that region's fuelwood dependency. Up to now, however, rather than reducing their share as their economies have grown, the developing countries have expanded their share of global consumption of fuelwood and charcoal from 84 percent two decades ago to 90 percent in 1994 (see Box 6).

The energy role of wood is not, however, confined to fuelwood and charcoal, and the data should not be confused with 'total wood energy'. Box 7 shows the many other ways in which wood has retained importance in energy even in the developed region of Europe.

On a per caput basis, consumption of all commodities from sawnwood to newsprint and packaging boards continued to grow since 1970. For developed countries, consumption per caput increased for most products, with that of panels and paper rising by more than 40 percent.

Developing countries, which had per caput consumption rates between 2 percent and 6 percent of the developed country levels in 1970 for the above commodities were, by 1994, consuming around10 percent or more. Most of this consumption increase was due to the rapidly growing economies of Asia. For wood-based panels and for paper and paperboard, developing country per caput consumption tripled between 1970 and 1994. As their purchasing power grows, developing countries can be expected to continue to close the gap with the industrialized countries; Asian countries have already begun to equal or surpass Europe as a consumer of a number of commodities. For industrial roundwood, Latin America is also significant on the world scale.

Box 6Fuelwood, charcoal and wood energy

Two in five people worldwide rely on fuelwood or charcoal as their main or sole source of domestic energy for cooking and heating. One-half of today's estimated 2 000 million users face fuel shortages as supplies of wood fuels dwindle. Among these, perhaps 100 million already experience virtual 'fuelwood famine'. Estimates suggest that the number of people relying on wood fuel will increase to 3 000 million by the end of the century.

Alternatives to wood fuels are often limited in rural areas that are remote from national power grids or centres of distribution of fossil-based fuels such as kerosene or coal. Yet, even where such conventional or 'convenience' fuels are available, many cannot afford them or simply prefer to use wood fuels for specific purposes.

Concern arose in the 19 70s and early 19 80s of the possible social and environmental consequences of fuelwood shortages, including, among others, deforestation, desertification, negative nutritional impacts and hardship associated with fuel collection. There was concern that the 'fuelwood crisis' was already occurring in some places, most notably, in Africa's Sahel, Brazil's northeast and the highlands of Nepal. National and international efforts were launched to find ways to increase production, to reduce household consumption of wood and wood-based fuels, and to identify alternative renewable energy sources for household use. The 1981 UN Conference on New and Renewable Sources of Energy, convened in Nairobi, Kenya, acted as a stimulus for these activities.

Without doubt, fuelwood shortages and overcutting can have negative economic, environmental and social effects. But, in most cases, fuelwood collection is not a primary cause of deforestation. Furthermore, it is now clear that fuelwood production and harvesting systems can be, and often are, sustainable. While the extent and the nature of the 'fuelwood crisis' has been reassessed, dependence on wood fuel is, and will continue to be, a reality, necessitating continued efforts to ensure adequate and sustainable supplies. In addition, economic and environmental concerns may provide opportunities for an expanded role for wood energy. Its potential as an environmentally-friendly and affordable energy source for industry is being considered and, in some cases, realized by many countries. The potential of biomass energy, including wood fuels as a substitute for fossil-based fuels, is also being investigated as a means of mitigating global warming.

Box 7Europe: energy dominates wood end-use

It is reported that in 1990, 47 percent of wood harvested in Europe, equivalent to 208 million m3, was used for energy.22 However, only about 44 percent of this was actually used in the form of fuelwood; another 24 percent was in the form of pulping liquors while the rest ended up as energy through other channels, such as in the burning of discarded pallets etc. According to the report, energy generation is 'by far the largest end-use for wood in volume terms [in Europe].' Equivalent information is not readily available for other regions.

Notwithstanding the growth of both population and incomes, sawnwood seems to have reached a plateau, with long-term consumption nearly stagnant relative to other processed forest products. Although the developing countries have achieved a doubling of sawnwood production since 1970, this is far less than the gains achieved for other commodities: a five-fold increase in pulp for paper and also in total fibre furnish; almost a six-fold increase in panels and recovered waste paper; and more than a six-fold increase in paper and paperboard (see Box 8).

Production of wood-based panels (veneer, plywood, particle boards, and fibreboards) has been particularly dynamic. Production in the developing countries has grown more than five-fold. New types of panels have competed with traditional ones and have also created new opportunities for use. Market shares are undergoing continual change in many markets.

There has been particularly rapid growth in the consumption of pulp and paper products and, in parallel, greater recycling. So rapid has this growth been, that world per caput consumption has increased by about 40 percent; consumption in developing countries is up more than three-fold, the fastest gains being in Asia. Non-wood fibre use has also grown rapidly in Asia.

Pressure on resources and responses As indicated earlier, the post-1970s period has witnessed a major increase in population; e.g., in Africa, population has nearly doubled. As much of the population increase has been in poorer countries, the demand for land for cultivation and pasture, in addition to infrastructure development, has exerted considerable pressure on forests. Meanwhile, the rising incomes of some major countries in the developing world have also created a greater demand for industrial forest products. This has added to other pressures and to already high consumption levels in developed countries.

These pressures have resulted in concern over deforestation and the sustainability of forests. International efforts to alleviate these problems became a hallmark of the late 1970s to mid-1980s. In industrialized countries, concern and economic pressures have led to a surge of efforts to use wood more efficiently. In. fact, one of the most significant developments of the 1970-94 period has been the efficiency gains achieved in processing. More products are being made with less wood from the forest, a situation which has major long-term implications for the sustainable management of forests and the adequacy of raw material supplies.

Successful adaptation is shown by the fact that, although processed products grew very rapidly (by two-thirds for pulp for paper, two-fold for total fibre furnish, and more than two-fold for paper and paperboard), consumption of the roundwood raw material itself was practically stagnant, having only increased by 15 percent. Particularly in developing countries, much of the waste that was previously left as forest residues at harvest sites is now being collected; wastes from saw and veneer mills increasingly end up as feedstock for reconstituted-panel products mills to make particle boards or fibreboards, and for pulp mills. Box 5 on page 31 presents developments in recycling; Figure 4 in this section shows the growing significance of recovered paper (which is recycled) in total fibre supply for paper and paperboard manufacture.

Box 8Sawnwood - possible reasons for its slow-down in growth

Sawnwood consumption appears to have reached a plateau in most countries. There is at least partial evidence of effective substitution for sawnwood by wood-based panels in certain key end-uses; in 1970 panels were equivalent to only 17 percent of sawnwood in volume but this ratio climbed to 24 percent by 1990 and 30 percent by 1994. This may have contributed to the slow-down in demand for sawnwood, although some of the increase in the use of panels may reflect new markets altogether. It seems likely that some of the most important factors restraining sawnwood consumption are as follows:

· Sawnwood is a product that generally demands larger and higher quality logs, which are increasingly scarce. Those that are available may be being diverted to more profitable end-uses (such as plywood). Availability of large logs for industry may also be increasingly constrained by environmental pressures to protect old-growth forests.

· The leading consumer countries (in North America, Scandinavia and Europe generally) may be approaching saturation levels of per caput requirements. Furthermore, relative to panels and non-wood sheet material substitutes, sawnwood demands relatively more labour to use (a costly and scarce factor in these countries).

· The current group of rapidly developing countries may not have the same timber construction traditions that drove the high demand in developed countries when they were at the same income levels. There is one more possible explanation: in the main producing countries, there may be a preference for higher value-added products being made directly from sawnwood so that an increasing share of sawnwood output is not produced as a commodity for sale but for input into secondary products, milled products, furniture and joinery components etc. Such output might not even feature in sawnwood statistics just as utility veneer is reported mostly as its end product, plywood.

Clearly, more research is needed to clarify the dynamics of the sawnwood industry today.

It is worth noting, however, that much of this change can be credited to marketing efforts in combination with technological advances. For example, marketing has created a demand for entirely new products to the point where panels made from chipped waste wood have not only partly substituted for existing products (sawnwood and plywood) but have also created new opportunities for the use of wood.

Forest products in 1994

As for other post-1990 years, 1994 was well below the historical trend in terms of production and consumption of forest products - the dislocation of production in the former USSR was still affecting world totals, particularly those for the developed countries. Due to the growth in the use of fuelwood, however, total roundwood consumption in 1994 was only 4 percent lower than in 1990. Industrial roundwood output, however, was down by 20 percent in developed countries and up by 4 percent in developing countries compared to 1990 levels. Output of sawnwood and wood-based panels, the other solid products, was also down in developed countries but had either been stable or had increased in developing ones.

Despite the situation in the former USSR, pulp and paper production increased in both developed and developing countries. This reflects only partly the fact that, although important, the former USSR was not decisive as a producer. More important is the evidence it gives of this sector's growing independence from forest supplies of raw materials. For example, production of wood pulp (to which the former USSR is a significant contributor) declined relative to 1990; it was, however, more than compensated for by a 21 percent increase in waste paper collection so enabling paper and paperboard production to rise by 6 percent in developed and 42 percent in developing countries.

In 1994, historical concentration of consumption and production continued. This also emerges as an issue in the section titled 'The global outlook for forest products' beginning on page 74. Using consumption of industrial roundwood and paper/paperboard as examples, three regions together account for 93 percent of consumption of paper and paperboard and for 81 percent of consumption of roundwood (see Table 5 of Annex 3).

As Figure 5 shows, concentration is also reflected in the fact that, of total 1994 production, the main five countries for each commodity accounted for:

· 48 percent of fuelwood (note that these were all developing countries - in order: India, China, Brazil, Indonesia and Nigeria);

· 60 percent of industrial roundwood;

· 57 percent of sawnwood;

· 53 percent of wood-based panels;

· 66 percent of total fibre furnish for paper manufacture; and

· 63 percent of paper and paperboard.

Comparing production and consumption patterns in tropical vs. non-tropical countries (see Table 6 of Annex 3), tropical regions accounted for three-quarters of both production and consumption of fuelwood and charcoal in 1994. By contrast, they accounted for only 17 percent of production and 20 percent of consumption of industrial roundwood.

References have already been made to the relative importance of developed and developing countries in production and consumption of fuelwood and industrial commodities. Table 5 reveals the rapidly growing importance of developing countries in production of processed forest products. Clearly, with growing consumption in home markets for those commodities of which they have traditionally been exporters, developing countries will be able to export less in the future. Market opportunities for forest products will grow faster in developing rather than mature-economy countries. The 'global outlook' section on pages 74-90 highlights how the shifting pattern of regional dominance and concentration may affect trade prospects for key regions.

· Fuelwood remains important and, in fact, continues to grow, with consumption now exceeding that of industrial roundwood. Provision of fuelwood must remain a central part of the forest products and resource-management agendas. Given such importance, the quality of data on fuelwood must be improved. New research is needed to update consumption coefficients, to characterize the changes in sources of fuelwood, and to place the commodity in a clearer context relative to other energy types as countries develop.

· In considering other potential uses for fuelwood, cases may exist where the demand for both fuel and industrial raw materials creates significant competition. A better information base on the sources of fuelwood relative to those of industrial inputs is therefore necessary.

· While the consumption of processed products expanded rapidly, the use of industrial roundwood grew by only 15 percent in two and a half decades. This encouraging development shows that industry has succeeded in increasing output with less roundwood raw material input, in recycling more materials and in using more residues. This suggests that a similar process must be induced in developing countries so they can enjoy consumption growth without placing unnecessary stress on the forest resource.

· The emergence of recycling of paper fibre on a major scale creates, for the first time, the prospect of a significant distance, although not a total separation, between the paper industry and the forest. This, however, may create problems for the profitable management of many forests.

· Concentration of production and consumption is a permanent feature of the industrial forest products scene. Asia's recent growth is occurring in a region which has very limited forest resources relative to its considerable needs; therefore, consumption growth is more highly dependent on trade than in the other major regions.

· The situation in the former USSR deserves increased attention. Some statistics are questionable: for example, it is surprising that in a cold climate zone, even consumption of a commodity like fuelwood has fallen dramatically. The question must be asked as to what proportion of the decline observed is real and what originates from severe disruption of the statistical systems. Of importance is the fact that policy changes may have the greatest effect on the forest products situation. It seems likely that factors outside the sector will predominate, such as changing railway tariff rates which make it uneconomic to take timber out of Siberia. A policy reversal on this and other external policies could therefore cause a rapid change in the situation.

aTheoretically, total fibre furnish should approximate paper and paperboard after adjustment for stocks and material in process

Non-wood forest products

The term 'non-wood forest products' (NWFPs) and the similar terms: 'minor', 'secondary', and 'non-timber' forest products, have emerged as umbrella expressions for the vast array of both animal and plant resources other than wood (or timber in the case of 'non-timber') derived from forests or forest tree species. Examples of NWFPs include: food and food additives, such as edible nuts, mushrooms, fruits, herbs, spices, gums, aromatic plants and game; fodder; fibres used in construction, furniture, clothing or utensils; naval stores (turpentine, rosin); and plant or animal products for medicinal, cosmetic or cultural uses. The sources of NWFPs vary; they may be gathered from the wild or produced as (semi-) domesticated plants in plantations or agroforestry systems. Their wild or semi-domesticated status distinguish them from well-established agricultural cash crops such as oilpalm, cocoa, coconut, rubber or coffee.

Value of NWFPs

Non-wood forest products have attracted considerable global interest in recent years due to an increasing recognition of their contribution to household economies and food security, to some national economies, and to environmental objectives, including the conservation of biological diversity.

They are of major significance primarily in households and local economies. An estimated 80 percent of the population of the developing world use NWFPs to meet some of their health and nutritional needs. Several million households worldwide depend heavily on these products for subsistence consumption and/or income. This number may be an order of magnitude larger if those who are seasonally dependent on NWFPs (e.g., livestock herders dependent on forest fodder/browse in the dry season) are considered. NWFPs are also used in many village-level artisanal and craft activities throughout the world. Some NWFPs undergo large-scale industrial processing for products such as foods and beverages, confectionery, flavourings, perfumes, medicines, paints or polishes.

Presently, at least 150 NWFPs are significant in terms of international trade. Most of these are exported in raw or semi-processed form. While most are traded in small quantities, exports of some products do reach substantial levels, such as honey, gum arabic, rattan, cork, forest nuts and mushrooms, essential oils, and pharmaceutical products (see Table 6). The figures on the value of international trade in NWFPs are indicative only and should be used with caution.

The estimated total value of world trade in NWFPs is in the region of US$ 11 100 million. The general direction of trade is from developing to developed countries, with about 60 percent being imported by countries of the EU, USA and Japan. China is the dominant world trader, but India, Indonesia, Malaysia, Thailand and Brazil are also major suppliers to world markets (see Table 7).

While NWFPs may represent the major actual or potential source of income from forests with low timber production potential, such as those in arid and semi-arid zones, with a few exceptions, it is unlikely that in production forests they can compete on financial terms with timber harvesting. NWFPs are likely simply to supplement the returns from timber rather than replace it as a source of revenue. Increased production of NWFPs in forests which are unsuitable for timber production, however, will enhance these forests' value, and thus at least theoretically provide a form of economic protection against conversion to other land uses. Care must be taken, however, that commercialization does not result in over-harvesting of NWFPs, since this can have its own negative environmental consequences.

Calls for increased attention to the production of NWFPs are often less motivated by economic considerations than by environmental and social concerns. Management of forests for NWFPs rather than for timber or in addition to timber is more likely to benefit the local economy and to provide goods and a source of income for forest-dwellers.

Factors affecting the development of NWFPs

Traditionally, maximizing revenue from timber production has driven forest policy and management decisions in many countries, and silvicultural systems have been designed specifically to enhance timber production. These policies and practices have in some places conflicted with the interests of forest-dwellers and people dependent on the forest for other uses and products, and have limited the development potential of NWFPs. With the increased recognition of the importance of NWFPs, however, more attention is being put on the development of forest management systems for sustainable use of both wood and non-wood products and services and to ensuring equitable distribution of the benefits.

The development of NWFPs has been limited, however, by the lack of accurate data on production and trade and also by weaknesses in the policy and institutional structures needed to support it. The economic importance of NWFPs is generally underestimated because much of the production and consumption is at subsistence level, and thus, data are rarely collected or published at a national level. When data on NWFPs are recorded, underreporting, double counting, grouping of NWFPs at different stages of processing or together with other products, and the use of unrealistic prices, are systematic shortcomings of such statistics. Clearly, improved statistical information will both clarify the economic significance of NWFPs and their trends, and provide essential information for management purposes.

Despite the growing attention given in many countries to the promotion and development of NWFPs, it is presently impossible to assess whether their socio-economic contribution has become more or less important. This is not only because of the lack of reliable time series of production and trade data for the majority of NWFPs, but is also due to the difficulty of differentiating production and trade from agricultural sources.

The potential for increased commercialization of NWFPs, however, would appear to be large if judged simply by the number of plant and animal products of known value for human use. Successful (and sustainable) commercialization of a NWFP that is currently collected and used in the household or sold in small quantities in a local market, however, is extremely difficult. There are a range of technical needs, and social and economic implications involved in doing so, and improved marketing processes and structures are essential. A number of important issues are being grappled with in current efforts to tap the economic potential of NWFPs. These include: the need to develop suitable management systems to avoid over-harvesting of the product in the wild; clarification of user rights over the resource, particularly where it is considered common property; research and development needs in semi-domesticating or domesticating a wild resource; development of effective marketing systems for the product; various legal issues, including intellectual property rights (how the country, the local user or other entity can be adequately compensated for use of the resource by outsiders) and patent rights in the case of research of an active ingredient from a national product leading to its synthesis. Much of the current effort on NWFP development, such as the establishment of extractive reserves, is focusing on providing or increasing alternative sources of income for forest dwellers or poor populations living near the forest. Large-scale commercialization of a product is neither guaranteed to benefit these people nor to protect the resource. It may not even be technically feasible or economically viable.

Consistent policies and support which specifically govern the management, harvesting and processing of NWFPs are lacking in most countries, but some (e.g., Indonesia, India and Turkey) have recently made some effort to redress this. Overall, the development and implementation of national policy frameworks to support the development of NWFPs remains a major challenge.

27 All figures quoted in this section are from various issues of the FAO Yearbook of Forest Products. FAO, Rome.

Trends

Only about 6-8 percent of world roundwood production enters international trade. However, the importance of international trade in forest products is clearly shown by the value of exports of primary forest products, estimated to have been worth almost US$ 114 000 million in 1994. This represents almost a 75 percent increase in real terms since 1970. For some countries, forest product exports are of major significance as a source of foreign exchange earnings.

There has been a continual upward trend in both the volume and value of forest products exports since 1970, which has become more pronounced in the last ten years. Since 1970, export volumes of industrial roundwood have increased by 21 percent to 113.4 million m3; sawnwood has almost doubled to 108 million m3, as has wood pulp (to 31.6 million tonnes); wood-based panels has increased four-fold to 38.2 million m3; and paper and paperboard has trebled to 72.7 million tonnes. Figure 6 shows these trends in quantitative terms.

This growth in trade also includes that of imported material which is re-exported, either with or without further processing, a situation that is common in Europe. For example, The Netherlands and Germany both serve as major import points while also exporting considerable amounts (much of which has undergone value-adding processing) to other European countries. A similar situation occurs in Asia with Singapore, Hong Kong, Republic of Korea, and the Province of Taiwan.

The relative importance in trade of some of the products has been changing (see Figure 7). While expanding in absolute terms, industrial roundwood's share of the value of total exports dropped from 15 percent to 9 percent, largely since the early 1980s, a trend that has continued into 1995/96. Wood pulp's share of exports declined steadily as importers moved to importing final products. Sawnwood remained relatively stable. In contrast, the share of both wood-based panels, and paper and paperboard increased, reflecting the growing emphasis on higher value forest products in world trade. Paper and paperboard products now account for approximately 44 percent of the value of world forest product exports, followed by sawnwood (21 percent) and wood-based panels (13 percent).

The share of total production that is exported has increased for all products except industrial roundwood. For example, the proportion of sawnwood exported has risen from 14 percent in 1970 to 26 percent in 1994, and of plywood from 14 percent to 37 percent (see Figure 8). In 1994, around one-quarter of the production of sawnwood, wood-based panels, and paper and paperboard, one-fifth of wood pulp production, but less than 10 percent of industrial roundwood production, were exported.

Dominance of the developed countries A feature of world trade in forest products is the dominance of the developed countries, both in exports and imports. In value terms, developed countries accounted for 81 percent of total exports in 1994, down slightly from 1970 levels. On the import side they accounted for 79 percent. Their dominance in 1994 was greatest for pulp, paper and packaging - from 85 percent of the wood pulp exports (79 percent of the imports) to 91 percent of the paper and paperboard exports (77 percent of the imports).

Figures 9 and 10 show the breakdown of imports and exports by region in 1994. They clearly indicate the dominance of Europe and North America as both importers and exporters and of Asia as an importer. Of additional note is the fact that much of Europe's exports are between countries within the region.

Another major feature of international trade in forest products is that, although many countries are involved, only few of these account both for the bulk of exports and imports (see Figures 11 and 12). In 1994, five countries accounted for 53 percent of world exports of forest products and ten accounted for 70 percent. Canada and the USA alone accounted for almost one-third. On the import side, five countries accounted for 51 percent and nine countries for 67 percent. The USA and Japan alone were responsible for 30 percent.

The main developed country importers are Japan and the USA, and a number of countries in the European Union, particularly Germany, the United Kingdom, Italy and France. Many of these countries are also significant exporters. The Russian Federation is an important exporter to both Europe and also Japan, although its exports have declined substantially in the last few years for a number of reasons including financial and infrastructural difficulties.

In recent years as their economies have grown, developing countries, particularly in Asia (notably China and the Province of Taiwan, the Republic of Korea, the Philippines and Thailand) have increased their share of global imports - mainly of logs and semi-finished wood products. China alone accounts for more than 20 percent of all developing country imports. Paper products tend to be the main imports of China, Hong Kong, Mexico and Singapore. By contrast, Thailand imports mainly industrial roundwood and sawnwood, and the Republic of Korea imports mainly industrial roundwood and wood-based panels.

Only plywood exports are dominated by developing countries; Indonesia alone accounts for 46 percent, with Malaysia accounting for a further 17 percent and Brazil for 4 percent. Most of the exports (by value) from developing countries are from Asian countries, which dominate exports of wood-based panels, logs, sawnwood, and paper products. South American countries, however, are the major developing country exporters of wood pulp. Indonesia and Malaysia have become important exporters of non-coniferous sawnwood, and Brazil, Chile and the newly industrializing Asian countries have increased their exports of wood pulp and paper products. Malaysia is the world's third largest exporter of logs (after the USA and the Russian Federation) and the fifth largest exporter of sawnwood. In general, exports by the developing countries have moved towards value-added products, although there is still substantial trade in unprocessed logs and woodchips.

Developing countries have a dominant position in trade in the area of tropical wood. Tropical: roundwood is estimated to represent about 15 percent of world industrial roundwood production. Tropical products account for varying shares of total exports: they represent more than 20 percent of the industrial roundwood exported; 10 percent of sawnwood; less than 10 percent of pulp, and paper and paperboard products; but 39 percent of wood-based panels (see Table 8). Within the general category of wood-based panels however, they account for 71 percent of plywood exports. Actual volumes of almost all tropical products exported have risen since 1970 and, for all except industrial roundwood, their share of total exports has risen, although only marginally for sawnwood. For all, their shares in value terms have also risen. Tropical countries have also increased their share of the global export value of all of these products over the period.

Production of tropical forest products has declined in the past two to three years, as has the export of some products. The decline in export volumes of tropical logs, sawnwood and wood-based panels is due to various factors. In many cases, the global changes hide considerable regional and country variations. For example, Asian exports of some products have declined recently while, at the same time, those of South America have risen. In some cases, the moves reflect changes in only one or a few countries (e.g., Malaysia, Indonesia and Brazil) rather than all countries. Some of the factors influencing the changes include:

· reduced harvest levels due to both environmental concerns and export market conditions; and

· a shift in exports from logs and, to a lesser extent, sawnwood, towards higher-value products; for example, Malaysia's exports of industrial roundwood have fallen dramatically from the levels of the late-1980s - a decline that is seen as likely to continue - but the volume of plywood exported has trebled since 1990.

Some of these trends reflect major structural changes that are unlikely to be reversed, while others are a response to normal short-term market conditions.

Table 8Exports of tropical wood and wood products (1970 and 1994)

1970

1994

total from all sources

total from tropical countriesa

percentage from tropical countries

total from all sources

total from tropical countriesa

percentage from tropical countries

industrial roundwood (million m3)

93.6

39.5

41.0

113.4

24.3

21.4

sawnwood (million m3)

57.4

5.4

9.4

107.6

10.3

9.6

wood-based panels (million m3)

9.7

1.2

12.4

38.2

14.9

39.0

plywood (million m3)

4.8

0.7

14.5

17.7

12.6

71.2

pulp (million tonnes)

16.9

0.04

0.2

31.6

2.6

8.2

paper and paperboard (million tonnes)

23.4

0.09

0.4

72.7

4.4

6.1

aestimate

Forest product price trends

Although nominal forest product export prices have risen steadily, FAO's real forest product price index has been fairly stable since the 1970s. The index has been increasing since 1985, after falling gradually in the early 1980s. As is normal for most products, there have been substantial short-term fluctuations within these broad trends, especially for individual products. Real prices of tropical logs have moved upward since the early 1970s; prices declined briefly between 1979 and 1985, but then rose again. The real price of tropical sawnwood has followed a similar trend, although with larger fluctuations and a steeper decline in the mid-1980s and a more rapid rise recently. The real price of other products, including wood-based panels, pulp, and paper and paperboard, continued to rise throughout the 1980s. For tropical products, this long-term increase may reflect a combination of decreasing product availability and increasing demand for tropical timber products, while the recent downturn in some real prices is linked to the depressed state of the economies in many importing countries. Prices of many wood products, both temperate and tropical, experienced strong rises in 1993-94, but subsequently declined almost to earlier levels.

Direction of trade

Recent years have also shown changes in the direction of trade, reflecting a wide range of factors, including: changes in consumption patterns; changes in resource availability from natural forests; investment decisions; development of new technologies; market preferences; political, economic and social changes; policy adjustments; and recent attitudes to environmental issues.

Significant features in recent years

Significant features that have emerged in recent years include:

· considerable expansion of the exports of most products, with an increasing number of both exporters and importers;

· a changing relative importance of products, such as:

- a decline in log exports and an increase in processed products, in particular in sawnwood and plywood, from many developing countries;

- substitution of softwood products for hardwood products in a number of markets; and

- increased overall trade in paper and paperboard;

· greater diversification of markets, and increasing intra-regional trade, the latter being fuelled by the increase in regional trade agreements such as:

- the expansion of the European Union;

- the signing of the North American Free Trade Agreement between Canada, the USA and Mexico; and

- the stimulus provided by the Mercosur Agreement between Brazil, Uruguay, Argentina, Paraguay and Bolivia (shortly to become an associate member).

Specific changes in trade flows

A number of significant changes in trade flows have been noted, including the following:

· the emergence or considerable expansion of log exports in recent years by a number of developing countries, such as P.R. China, Ghana, Papua New Guinea, the Solomon Islands, Cambodia and Chile;

· an overall increase in log exports since 1990 due to an increase of exports from developed countries (increases by the former USSR and New Zealand compensating for a decline by the USA) which offset a decrease from developing countries (largely reflecting a 60 percent reduction by Malaysia);

· increased intra-developing country trade flows as Asian countries such as China, the Republic of Korea and the Province of Taiwan have increased their imports (especially of logs and sawnwood) from other developing countries, including African countries;

· increased Latin American exports of all products, including pulp and paper, dominated by Brazil and to a lesser extent Chile; exports by Brazil more than doubled in value between 1987 and 1994;

· increased trade by softwood exporting countries in the Southern Hemisphere, such as New Zealand and Chile;

· expansion of imports from all sources by China, Republic of Korea, and Thailand;

· the substitution of hardwoods by softwoods in some important markets, such as Japan;

· increased trade in higher-value products - since 1990, export values have increased by 40 percent for sawnwood, 52 percent for wood-based panels, and 300 percent for paper and paperboard; there have also been increased exports of furniture components, mouldings, etc.;

· expansion of exports by a number of European countries reflecting increased intra-European trade;

· dramatic declines in supplies from the Russian Federation due to a number of factors including infrastructure problems, environmental difficulties, and financial and political constraints;

· increased exports by the USA of non-coniferous sawnwood; these have doubled since the mid-1980s as the value of the non-coniferous resource has been recognized and strong industry efforts have been made to export a range of products;

· the impact of environmental constraints on USA exports;

· the almost complete cessation of log exports in the late 1980s by two of the major exporters - Indonesia and the Philippines - with the former changing to exports of plywood and, to a much lesser extent, sawnwood; while the latter became a net importer because of a lack of harvestable forest resources;

· a substantial increase between 1984 and 1994 of Canadian exports of sawnwood (+22 percent), particle board (+300 percent), pulp (+49 percent), and newsprint (+18 percent), with the greatest proportion of these continuing to go to the USA;

· changes in patterns of trade as former political and trade ties were disrupted or modified as a result of the emergence of a number of new countries resulting from the re-unification of Germany and the breakup of the former USSR.

The impact of the Uruguay Round

Trade restrictions on forest products are many and varied and, although for most products are not of major economic significance, often act as important impediments to open trade. One of the main international mechanisms for reducing restrictions has been the series of multilateral trade negotiations carried out under the auspices of the General Agreement on Tariffs and Trade (GATT). The most recent round of negotiations, the Uruguay Round, was officially concluded in April 1994. As a result of this, trade will be encouraged by the tariff reductions agreed, greater scrutiny and control of non-tariff barriers, and improved standardization of the general rules and principles that countries should follow in their trade relationships. The impacts on trade will vary considerably between countries and by product but, for forest products in general, are likely to be beneficial though not substantial, since for most forest products, tariffs had already reached low levels in developed countries before the Uruguay Round.

Effects of tariff changes on forest products

A number of tariff reductions on forest products will be phased in over a period of years. As tariff rates on forest products were generally quite low before the Uruguay Round, the gains will be relatively modest for many of them. Certain countries will continue to maintain high tariffs on some of their products.

For the developed countries, significant reductions were agreed upon for many products. The main importing countries committed themselves to reducing tariffs on a range of solid wood products over a five-year period, starting in 1995. Other countries also agreed to reduce tariffs on solid wood products, or at least to 'bind' their rates. Binding is where countries place a ceiling on their tariff rate, and thus agree not to raise it above this level. Reductions by the developed countries are estimated to average (on a trade-weighted basis) 43 percent for solid wood products in total. The reduction for wood-based panels is estimated to be 31 percent, and to range from 50-60 percent for more highly processed wood products. For paper and paperboard products, the overall reduction will be 99 percent, since all the main importers (USA, Canada, EU and Japan) and some others will phase out their tariffs completely over an 8 to 10 year period. In the case of furniture, some major importers such as the European Union, Japan and the United States have agreed to eliminate tariffs completely over the next 8 to 10 years.28

28 GATT 1994. The Uruguay Round Deal, April.

Despite this, post-Uruguay Round rates are still high for some forest products. As has been the case previously, wood-based panels (especially plywood) and some value-added products will continue to face greater restrictions than most products.

The picture for the developing countries is more mixed. Some developing countries agreed to reduce levels on specified products - in some cases by up to 60 percent. This is from very high rates, however, so even after the changes, most rates will still be substantially higher than for developed countries.

Another feature of the changes agreed to in the Uruguay Round is that preferences, which restrict volumes (tariff quotas) for some countries, will tend to be replaced by a single bound tariff rate in the future. The best-known preferential system has been that of the UNCTAD Generalized System of Preferences (GSP) under which individual developed importing countries offer low (often zero) tariffs to developing countries, without requiring any reciprocal benefits. This system of preferences will become less common, to the detriment of developing countries, although with the general reduction in tariffs that has occurred in recent years the benefits of such schemes had already declined to a degree.

Virtually all pre-Uruguay Round rates were unbound but, under the Uruguay Round agreement, all major developed countries and many developing countries are to now bind their rates. This will provide greater certainty for exporters.

Effects on non-tariff barriers (NTBs)

The effect of the Uruguay Round negotiations on NTBs is more difficult to predict than that on tariffs since their existence and their impact is more difficult to identify. Benefits should result from the greater degree of discipline imposed and uniformity in the way in which countries interpret and implement various regulations. A number of agreements which were negotiated separately from the individual country tariff changes should further reduce the effect of many NTBs and improve the way in which trade is conducted. Two agreements which are of special interest to forestry are: the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) which could improve conditions surrounding inspection and quarantine; and the Agreement on Technical Barriers to Trade (TBT) which could limit the use of technical regulations for other than legitimate health, safety, product quality, and environmental protection purposes. A further significant change is that, by joining the World Trade Organization (WTO), a country is now committed to accepting all the results of the Uruguay Round without exception. Previously, countries were only controlled by the particular agreements to which they were signatories.

Overall effects of the Uruguay Round on trade in forest products

A recent study29 on the effects of changes under the Uruguay Round estimates, conservatively, that the expansion of international trade in forest products in the main trading countries when all tariff reductions have been implemented (i.e., around the period 2000-2004) may be between US$ 340 and US$ 472 million.30 Since this is less than half of one percent of the forest product imports of the countries analysed, it suggests that although the trade gains from the Uruguay Round are likely to be positive and worthwhile, the impact on global forest products trade may not be substantial. To a large extent this reflects the fact that tariff rates for most forest products were relatively low before the Uruguay Round began.

30 These estimates are conservative since the analysis was limited to the impact of the tariff changes, and was restricted to logs, sawnwood, panels and pulp and paper (i.e. did not include products such as furniture, other paper, builders joinery).

The effects of the Uruguay Round will vary by country, by product and by market. As a group, developed countries are likely to benefit more than developing countries. When fully implemented, tariffs in developed countries on many products will be reduced to very low levels or completely eliminated. However, since some countries will continue to maintain high tariffs on some of their products, gains will be limited to certain products in particular markets. Plywood and some value-added products will continue to face greater restrictions than most other products. Stricter control over the implementation of NTBs will also be beneficial.

A significant benefit may not be from the reductions that were agreed to in the negotiations, but from the impetus that the Uruguay Round process has given to continue reductions and improvements, a situation that has already become apparent.

Environmental awareness and the effects on trade International trade in forest products has been affected by environmental concerns. Issues are related to the effects of international trade on the environment and, conversely, the impacts of environmental action on trade. One view is that the pressure generated by markets (and excessive consumption) is a major cause of damage to, or even loss of, forests. An alternative view is that international trade has no effect on the environment and therefore should not be targeted by those seeking solutions to environmental problems.

There is clear evidence that, while having an impact, trade is not a major direct cause of environmental problems, and that trade actions alone cannot ensure sustainable management of forests. Nonetheless, a variety of trade initiatives have been proposed and implemented as a response to environmental concerns. Some, such as actions relating to waste paper recycling and recovery, pollution controls, processing methods, etc., have already had an impact in some countries. They will continue to do so and are likely to extend to other countries. Other action - such as certification of forest products, listing timber species on the appendices of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the introduction of packaging regulations, and technical regulations and standards for product and processing methods - have had less effect to date, but seem likely to have a greater impact in the future. Some of the main environmentally-driven developments which have had or are likely to have an influence on trade are discussed briefly below. They illustrate the diverse and complex nature of the subject.

Trade in certified forest products

The certification of forest products has become one of the most topical and controversial subjects in forestry, largely as a result of the efforts of environmental groups and the pressure they have brought to bear on governments and retailers in some important importing countries (see also Part 3) Certification is currently discussed, debated and analysed at almost every meeting concerning forestry management and trade issues. Certification attempts to link trade, particularly international trade, to the sustainable management of the forest resource by assisting users to purchase products made only from timber from sustainably managed forests. Certification may also encourage improved environmental standards in post-harvest activities. While the focus so far has been mainly on timber and timber products, attention has recently expanded to include pulp and paper. There are also suggestions that the certification of non-wood forest products should be considered.

Views and attitudes towards certification range from strong support, through mild interest, to no interest or even opposition to the idea. Currently, a considerable, and growing, number of certification systems are being assessed or developed throughout the world, both in developed and developing countries, and there is now widespread acceptance of them in a number of countries, although in many cases grudgingly. It has largely become an issue of 'how', 'when' and 'by whom', not 'why' and 'whether'.

The current situation

The actual impact of certification on trade at the global level has been very small to date. The volume of products covered by operational certification schemes is insignificant at global or even regional terms. Commonly quoted (though unsubstantiated) estimates of the area covered under certification schemes range from 2.3 to 4 million ha, with the quoted roundwood output of these forests ranging from 1.5 million m3 to 4 million m3.31 To put this in perspective, even the upper estimate represents less than 0.5 percent of the wood entering international trade, and a negligible proportion of total wood used for industrial purposes. The value of certified wood products currently traded, either internationally or nationally, is unknown but minor.

Importing countries which have active environmental groups and trade interests who see a market advantage from providing certified products have the greatest interest in certification. Western Europe has been most active, particularly Germany, The Netherlands and the UK, while certification schemes are also being investigated in Denmark, Switzerland and Austria. Little interest in certification has been shown to date by other European countries such as France, Spain, Portugal, Ireland and Italy, or by major Asian import markets such as Japan, the Republic of Korea and China. Exporting countries most active in developing certification schemes are those whose main external markets are showing greatest interest in certified products. Among these are Australia, Brazil, Canada, Finland, Indonesia, Malaysia, New Zealand, Norway, Sweden and the USA. Regional bodies such as the African Timber Organization (ATO) have also initiated moves towards a 'green' label.

All existing or proposed certification systems are based on evaluating the standard of forest management being followed, in order to determine whether or not forests are being well/sustainably managed. Two approaches, about which there is currently considerable disagreement with respect to their relative merits, are the use of a 'performance standards' approach, as used by the Forest Stewardship Council (FSC)32, and one based on a 'process standards' approach, such as that of the International Organization for Standardization (ISO). While many consider the two approaches to be incompatible, there appears to be growing recognition that they may in fact be mutually supportive, and that a degree of mutual acceptance could eventually be achieved.

32 The FSC Is an NGO, recently established (accredited in 1994) in Mexico, It was established to act as an accreditor of certification bodies, in order to ensure that common standards are used in the certification process. Accredited certifiers must apply a set of principles and criteria that have been established by FSC. The organization has also recently released a label which may be carried by products certified by FSC-accredited certifiers. To date some five certifiers have been accredited by FSC, and these have certified a small number of forests in various countries.

Emerging issues

Despite progress made so far, and the considerable attention certification is receiving, there are still many unresolved issues and uncertainties surrounding it. Certification is based on two assumptions: first, that external pressure applied through trade will encourage improvements in forest management practices; and second, that market demand for products from sustainably managed forests is significant and that markets are prepared to pay a premium in some form (e.g., higher prices, increased demand, greater market share etc.) for them. It is still too early to judge the validity of these assumptions. Forest owners are unsure of what must be done to meet certification requirements, what the costs and benefits will be (and for whom), and how essential it will be. to be certified. Trade interests are uncertain of what the benefits and costs of certification will be to them, and how to develop an effective certification scheme which benefits both the consumer and themselves. There is also considerable debate on what is the most effective certification process.

Views differ widely on the size and duration of the economic impact that certification schemes may have on trade. At present there is demand for some 'environmentally sound' or 'green' products in some countries, but little evidence that the size of this demand is substantial, or that price premiums will be paid other than for selected products. One possibility is that there may be considerable market benefits to some individual companies or producers but not to forestry as a whole.

Although the effect on trade is limited to date, a considerable degree of market uncertainty is being generated in many markets, together with some concern amongst many of those involved in trade in forest products, from producer to trader. One concern is that, unless carefully implemented, certification may act as a non-tariff barrier to trade by discriminating either intentionally or unintentionally against those unable or unwilling to achieve the required forest management standards. In particular it may disadvantage a number of developing countries. If imports are restricted to those of which the production has been certified as 'sustainable', even producers able to meet forest management requirements could easily face the significant barrier of adapting to different requirements in different markets. Certification may also favour industrialized countries where, at least at present, forest management practices tend to be closer to sustainability goals. Even though most schemes seem likely to be voluntary, they may in reality be compulsory since some important retailers may be unwilling to carry uncertified products (as is occurring in the UK), and consumers may even switch to substitute products made from material other than wood (as is already occurring in some European countries to a degree). There is also concern that certification may give consumers the impression that unlabelled products (including those that have not been assessed) have been produced in an environmentally irresponsible way.

Overview of the future

Certification is still in its infancy. It seems likely, however, that certification will have an increasing impact at least for the next few years, though the exact nature of the impact is difficult to predict at present. At least in the short term, it may cause a degree of trade disruption as countries or individual interests in a country come to grips with the various systems and approaches being promoted. The longer-term impacts will depend on a wide range of factors, but in particular on the degree to which certification becomes accepted and trusted in the marketplace. It seems likely that it will begin to affect trade patterns and, in the longer term, if more widely adopted, may also affect the types of products traded.

In summary, although the direction and scope of certification is difficult to predict at this stage, the following seems likely: (a) certification activities will continue to grow, at least in the short- to medium-term (3-5 years); (b) its growth is unlikely to be rapid, if for no other reason than the fact that there is a limited area of forests which can meet the strict definitions of sound forest management; (c) the market impact will be limited to certain (but a growing list of) countries; and (d) it will probably be confined to small niche markets, with positive market benefits in some countries for some suppliers.

Box 9The goals of certification

Certification is being promoted with two primary objectives:

· to improve the management of forests in order to achieve their sustainability; and· to provide market access for the products from these forests.

There are two main components to certification:

· certifying the standard of forest management; and· certifying the products that are made from wood from these forests.

At present, most of the focus is on determining whether products are derived from sustainably managed forests.

Little attention is being paid to certifying on the grounds of environmental soundness in post-harvest activities, that is, in distribution and processing (e.g., plant emissions, waste disposal, energy use and transport). Thus, in most situations, these activities do not fall into the category of 'ecolabelling'. In the case of pulp and paper, however, certification has extended beyond forest management standards to process-related issues such as plant pollution, the content of recycled or waste paper used, and the process used to manufacture the product (e.g., whether the process is chlorine-free). Other forest industries are likely to follow this trend

Impact on trade in timber species listed in the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)

The CITES uses a system of permits issued by designated authorities in member countries to regulate international trade in wildlife and wildlife products. Species, sub-species or populations may be listed in one of three appendices to the Convention: Appendix I, which essentially prohibits commercial trade; Appendix II, where trade requires an export permit issued by the Authority in the exporting country; or Appendix III, where commercial trade is subject to export permits for the country or countries listing the species, or a certificate of origin from other countries. Species presently contained in the CITES appendices are listed in Table 9. Only one included in Appendix II (Pericopsis elata) and one in Appendix III (Swietenia macrophylla) are traded internationally in significant volumes.

Although CITES has been in existence for 23 years, it has only recently become a high-profile and controversial issue for forestry. The main cause of the controversy has been attempts by developed countries, strongly supported by conservation groups, to have a number of commercially important species that are found in tropical developing countries placed in CITES appendices. This reached a peak in 1994 when The Netherlands and Germany proposed a number of tropical species for listing in Appendix II. It has continued with a proposal by Costa Rica, which resulted in big-leaf mahogany (Swietenia macrophylla) being listed in Appendix III in November 1995. As a result of this latter move, all other countries in the Americas where mahogany exists now have to issue certificates of origin or certificates of artificial propagation for their exports of sawlogs, sawnwood and veneers.

Concern has been expressed by forestry and trade interests that CITES is being used to stop or limit trade. Difficult issues that have surfaced include: whether the species proposed for listing are really endangered or threatened and what procedures should be used to determine this; who should have the right to instigate the listing of a species and what the rights of the affected countries should be; and what changes are needed to the current CITES procedures used once a species is listed.

Accurate determination of whether a particular species is in fact under threat from trade, and therefore warrants listing, is often extremely difficult due to: a lack of accurate information on what is traded and what actually exists in the forests; the difficulty of identifying timber and timber products from individual species; and the complicated process through which trade in timber is conducted.

Trade interests argue that the mere listing of a species - even in Appendix III - will have a negative impact on trade in that species. A more general, but highly relevant issue, on which there is little clear evidence either way, is whether the CITES system does in fact have any significant effect on the likely survival of a species.

As the result of the concerns and controversy generated, CITES established in 1994 a temporary Timber Working Group to look into the issues concerning timber and timber products. This Group met twice in 1995/6 and has made a number of proposals which will be considered by the CITES Conference of Parties when it next meets.

Trade in waste paper worldwide has grown over the last decade and a half. Exports have increased by almost 9 percent per year since 1980 while world consumption of waste paper grew by about 5.3 percent annually over the same period. (See 'Changing processing technology and product development' on pages 30 to 33 for more information on recovery and recycling of waste paper.) Major importers of waste paper include P.R. China (specifically the Province of Taiwan), Republic of Korea, Mexico, The Netherlands, Italy, France and Japan, while the largest exporters are the USA (50 percent of world exports), Germany, The Netherlands, France, Hong Kong and Belgium.

In some cases, the policies promoting recycling of waste paper have had significant effects on trade. For example, in 1989 about 56 percent of all newsprint consumed in the United States was supplied by Canada, but by 1992 the figure had declined to 50 percent. This reduction has been influenced by US legislation (both federal and state) setting minimum levels for recycled fibre content in newsprint (typically 40 percent), together with programmes to stimulate market demand for recycled paper, and tax incentives for companies installing recycling technologies. Because Canada has a relatively small and dispersed population, consumption of newsprint is small relative to production, and hence the availability of waste paper is limited and collection is expensive. To meet the US waste paper content requirements, Canadian newsprint producers have had to import waste paper from the USA; more than 700 000 tonnes of recovered paper were imported from the USA in 1992.

As with recycling, regulations on recovery and recycling of packaging waste introduced in many western European countries have effects on the direction and extent of international trade in forest products by altering competitiveness and affecting import markets, especially from more distant suppliers (see pages 30 to 33).

Technical regulations and standards for products and processing methods

Technical regulations and standards related to the protection of animal and plant life from: pests and diseases; human health and safety; and maintenance of air, water and land quality, also result in considerable adjustment and re-adjustment in terms of trade, by changing relative costs and comparative advantages, and consequently trade patterns.

Measures include: the growing restrictions on trade in wood panels using formaldehyde glue, which poses human health risks; regulations which ban or control certain timber preservation processes and materials; and controls on processing methods. For example, there have been widespread moves to encourage or force companies to replace chlorine (which produces extremely toxic by-products) with other more environmentally-friendly bleaching agents in pulp and paper processing (see pages 30 to 33). Trade disputes have arisen over health requirements aimed at protecting the importing country from product-borne diseases. These disputes centre on differing views of the level of risk faced, and on the appropriate way to deal with the problems.